India’s cash use keeps rising even as UPI scales to record transaction volumes
Currency in circulation rose 12.5% year-on-year as of July 31 despite UPI processing more than 24,000 crore transactions in 2025-26. The RBI attributes persistent cash demand to economic growth, uneven digital adoption, rural usage, inflation and small-business needs.
What happened
UPI is rapidly displacing cash in Indian transactions, but currency in circulation still rose 12.5% year-on-year. RBI attributes the cash paradox to economic
Key facts
- Currency in circulation grew 12.5% year-on-year as of July 31, 2026
- Currency growth was 12.4% at end-June
- Reserve money growth was 12.6%
- Broad money supply grew 14.7%
- UPI processed over 24,000 crore transactions worth nearly Rs 314 lakh crore in 2025-26
- Over 2,50,000 ATMs and cash dispensers support cash distribution
- About 17,600 crore banknotes are in circulation
- 2,800-3,000 crore notes are produced annually
- Around 2,100 crore unfit notes are disposed of annually
Why this matters
Prioritize partnerships or acquisitions in cash logistics, merchant reconciliation and offline payment enablement to build an omnichannel payments stack beyond UPI alone.
What to watch
- Currency in circulation growth versus nominal GDP growth and CPI inflation.
- UPI transaction value growth versus transaction-count growth, especially in tier-2/3 cities and rural districts.
- ATM cash withdrawals, cash-in-transit volumes and bank branch cash deposits by region.
- RBI action on digital-payment incentives, offline UPI, feature-phone payments, merchant discount economics and cash management.
- Merchant surveys on cash share of sales, supplier-payment methods, change shortages and reconciliation losses.
- Connectivity outages or fraud episodes that increase consumer and merchant preference for cash resilience.
- Maintain cash acceptance, adequate till-float policies and cash-out contingency plans alongside UPI-first checkout design.
- Segment payment behavior by city tier, rural catchment, basket size, category and customer cohort; avoid using UPI share as a proxy for cash obsolescence.
- Invest in faster cash reconciliation, armored pickup optimization, counterfeit detection and store-level cash forecasting.
- Offer UPI incentives selectively where they improve economics, but avoid discounts that alienate cash-paying customers or compress already-thin margins.
- Expand assisted digital journeys: QR payments, cash-to-digital top-ups, bill pay, withdrawals and merchant settlement tools for kirana ecosystems.
- Build outage-resilient payment workflows, including offline acceptance procedures and clear fallback paths when connectivity or bank rails fail.